The stock market flotation of insurer Direct Line today represents a rare ray of sunshine for banks and brokers starved of fees. Times are tough just now in the Square Mile: trading activity is down, with little prospect of a short-term recovery. Aside from the shenanigans at defence giant BAE Systems and miners Glencore and Xstrata, the volume of potential transactions has been painfully low. Prepare for the City jobs axe to be swung again before Christmas.

If it could have helped it, I doubt Direct Line, famous for its red phone on wheels, would have chosen this month to roll onto the public markets. Economic confidence is still weak thanks to the eurozone crisis, and a Competition Commission probe into motor insurance hasn’t helped the company’s prospects either. But Royal Bank of Scotland, owner of Direct Line, is being forced to sell by Brussels as the price for the state aid it received when it was bailed out by the taxpayer.

What has surprised is the appetite from retail investors. Pension funds have been distinctly cool about the shares, which have been keenly priced to drum up interest. Yet stockbrokers have reported brisk trade from 25,000 punters willing to lay out £1,000 a time to buy into an insurer that they technically already own.

Are fools rushing in? Quite possibly. But in the week that George Osborne caused a fuss by proposing that workers give up some of their employment rights in exchange for a stake in their business, it is a reminder that share ownership still has wide appeal. So it should — especially given evidence that equities make money work harder than simply leaving it on deposit. And if buying into business helps to rehabilitate the private sector in the eyes of the man on the street, what more can be done to encourage it?

Retail share buying has tailed off in recent years. A generation ago, homeowners piled into Thatcherite privatisations of British Telecom, British Gas and numerous water companies, egged on by Tell Sid advertising promotions. Those who held on have done well and have grown used to steady dividend payments. Many never sold because the investment strategy of a lot of small investors is one of simple inertia.

However, there have been a string of takeovers and fewer state assets left to sell. These are the types of investments that typically draw small investors in. Fewer companies that float can be bothered with the hassle of extending their offer to retail shareholders. Looking at Wall Street, such a stance could have been a blessing in disguise. Facebook and other hot internet prospects have been huge disappointments — creating great fortunes for their founders and managers but a slumping stock price for the little man who bought in during the heavily hyped flotation.

Osborne’s plan is to bridge a similar divide, between employer and employee. But fusing two coalition aspirations — making it easier for firms to sack workers and creating a John Lewis economy of mutually owned companies — looks clumsy.

I’m with Justin King on this. The Sainsbury’s boss pointed out that the plan, which is to be rushed into law by next April, would increase widespread mistrust of business rather than alleviate it. And rather than making it easier to sack staff, just make it cheaper to employ them in the first place, maybe with national insurance holidays for those small firms that want to expand.

How then can firms turn staff into shareholders? It’s a valid debate, and one that the Government has agonised over. John Lewis, whose partnership hands staff a share of profits every year, is faintly embarrassed at becoming the poster child of this policy. But there are others, such as design engineer Arup, which worked on The Shard.

Francis Maude, the Cabinet Office minister, has a team examining Whitehall for small units that can be spun out into fledgling companies that marry private equity investment with free shares for staff. He’s not alone: new rules mean some City law firms are looking to blur the ownership divide between partners and everyone else with staff investment schemes.

These are the sort of partnerships that could soften the image of business into something that creates jobs and wealth and doesn’t just feed the rich. Maybe they will encourage the type of long-term thinking that an annual bonus fails to achieve. However, widespread share ownership doesn’t necessarily signal a well-run company. A quarter of Lehman Brothers stock was in the hands of its staff just before it collapsed.

First principles suggest staff should take risks if they want rewards over and above their basic earnings. After all, entrepreneurs fêted for building successful companies pay themselves a tiny salary in the early years to keep down costs in the hope that their equity will be worth something one day. I’d favour beefing up save-as-you-earn schemes that generate occasional headlines about the checkout girls who have bagged a £20,000 windfall after years of diligent saving.

It should be the same mission on the stock market. Clever punters know they are better off investing in derivatives that let them speculate on a share’s movement without actually having to buy the share and incur the associated charges when they sell. Xavier Rolet, the London Stock Exchange chief, is fond of reminding people that despite the ongoing clean-up from the last debt-fuelled collapse, companies are still incentivised to increase their borrowings instead of raising cash through the issue of new shares because of the way the tax regime is structured.

That leads me to the old chestnut of scrapping stamp duty on share transactions. It’s a very long shot. Osborne is more likely to cut the top rate of tax again — and that is very unlikely. But anything that makes direct investment in companies easier, for staff, customers or speculators, would be a step in the right direction.